The United States Treasury Department is about to release a further $600 million in Federal aid that targets up to 50,000 underwater American families in the five States with the worst levels of unemployment – that is, an average amount of $12,000 allocated per mortgaged home. Housing agencies in Ohio, Oregon, North Carolina, South Carolina and Rhode Island will be using the money from the hardest hit fund to assist with their foreclosure mitigation efforts.

According to Treasury Assistant Secretary for Financial Stability Herb Allison “the funds will start flowing in the next several months, state by state” as individual proposals are approved and reach the implementation phase.

The five States benefiting from the program all had counties where unemployment reached 12% in 2009 (compared to the current national rate, which is edging closer to 9.6%). The housing agencies will be concentrating on the most deserving cases this time round, as opposed to previous attempts at blanket foreclosure prevention. “For the people who are going to be helped by this,” Allison continued, “it will make a very meaningful difference.” The average beneficent homeowner may expect to receive $10,000 between 2010 and 2012.

The current initiative, which was announced on Wednesday, follows on a $1.5 billion grant awarded for similar purposes to Arizona, California, Florida, Michigan and Nevada, all States where falls in home prices have been the most pronounced. Both programs were funded from the $700 billion HAMP kitty approved by Congress late in 2008.

Plans announced by States that benefit vary. Some will put the emphasis on tackling unemployment; others will subsidize mortgage payments, while the rest prefer to co-fund the costs of principal reductions or short sales. Ohio, for example, has plans to extend federal mortgage payment assistance beyond the statutory 3 months. The individual allocations are as follows:

  • Ohio —> $172 million
  • North Carolina —> $159 million
  • South Carolina —> $138 million
  • Oregon —> $88 million
  • Rhode Island —> $43 million

Treasury Secretary Tim Geithner was recently roasted by Elisabeth Warren (a Harvard Law Professor currently overseeing efforts to rescue banks) regarding the ineffectiveness of HAMP. In the course of that, the doughty Treasury Secretary defended HAMP stoutly, claiming among other things that it has helped avert a severe recession. “We think what we are doing is making homeownership more affordable for people who are struggling,” he said, “[and] we expect that those people will find it easier and more realistic to stay in their home for a longer period of time.”

Despite that, twice as many borrowers abandoned HAMP last month as HAMP assisted, according to Tim Geithner’s own Department.

Find more news like this at www.foreclosuredatabank.com.

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